Reason Foundation

Privatization Trends In Local Government

Mildred Warner and Amir Hefetz have a new Reason Foundation policy brief looking at privatization and outsourcing trends from 2002 to 2007. They write:

Local governments in the U.S. use a variety of mechanisms to deliver public services. The International City County Management Association (ICMA) conducts a survey of alternate service delivery by local governments every five years. For those interested in understanding the role of privatization in local government service delivery, the ICMA surveys are the best barometer of local government practice across the United States. The 2007 survey (supported by the Searle Freedom Trust) shows that public delivery is still the most common form of service delivery at 52% of all service delivery across all local governments on average. Intergovernmental contracting at 16% and for-profit privatization at 17% are the most common alternatives to public delivery. Non-profit delivery at 5% is next, and franchises, subsidies and volunteers collectively account for less than 2% of service delivery...

In this article we look at trends from 2002-2007 with a special focus on differences in service delivery patterns by metro status. The 2007 survey received 1,474 useable responses from counties and cities across the country. The majority were suburbs (784 cities, 53%), and the rest were metro core municipalities (262 cities, 18%) and rural areas (428 municipalities, 29%). Local governments experiment in various types of service delivery. The levels of contracting go up and down over time and vary across metro status. The “reinventing government” reforms of the 1990s saw a rise in for-profit contracting among all governments from 1992 to 1997. In fact, in 1997 for-profit contracting peaked nationwide at 19%. Over the last decade suburbs have consistently had the highest rates of contracting. Metro core governments, which had lagged behind suburbs in their level of contracting, appeared to be catching up.